FCA Renewal Regulations – 6 Months On
For many people, the single exchange they have with their insurer is when they pay a renewal on their insurance policy every year. Alarmed by a lack of engagement, the Financial Conduct Authority (FCA) introduced new regulations with hopes of reinvigorating the renewals process for insured customers.
Since April, insurers have included details of the previous year’s premium price in their renewals notices, indicating how much their policy has increased by, and encouraging customers to shop around for a better deal on their insurance.
As well as reminding consumers about price alterations, insurers remind them to check if their cover is appropriate for their needs and that they are able, if they so wish, to compare the prices and levels of cover offered by alternative providers. Furthermore, customers who have renewed with the same insurer for more than four years receive a notification on their renewal notice informing them they could save money if they changed providers.
The FCA also issued more general guidance on improving renewal practices and encouraged all insurance firms to consider this advice alongside the formal regulation changes. The guidance includes informative notes on appropriate language to be used in renewals notices (which does not discourage the customer from reviewing their policy), changes to policy terms and conditions and how to clearly communicate them to the consumer and making clear to customers the actions they should take if they do not wish to continue with their policy.
Despite some well-reported failures to fully meet the new regulations on time, the changes are now embedded into standard renewal processes. For some customers it will validate that they are receiving a fair deal from their existing provider, others will feel vindicated in continuing the more-and-more common practice of shopping around whilst it may be a catalyst for a first foray into the wider market in decades for certain Policyholders. Conversely, some might feel being told to shop around is stating the obvious, after all, major price comparison sites spend millions per year on their multi-channel campaigns to remind us that shopping around is best.
For insurers and brokers it has brought even more into focus renewal rate shock and the resultant impact on customer behaviour and potentially adverse effects on life-time value models.
Whatever the customer actions at renewal, the changes can certainly be seen as a step in the right direction in respect of providing clarity. Ultimately, alerting customers to price changes on an annual basis delivers a line of transparency that hasn’t always been commonplace in general insurance.